Betreff: 21% Wholesale Inflation Annual Rate
Datum: Tue, 16 Nov 2004 12:28:32 -0800

21% Wholesale Inflation Annual Rate!

The government released its wholesale prices report today and it showed prices at the wholesale level were up 1.7% in the month of October alone. You can thank soaring energy prices for more than 1% of that. The Producer Price Index was up 0.6% for the month, or an annual rate approaching 7.5.  But that's nothing compared to the 21% annual rate revealed in the wholesale price numbers.  Who told you this?  Last year, in my December annual forecast, I said inflation (real inflation) would come in at 13% - and here we are with two more reporting months to run and the annualized rates are just about exactly where I thought they would be, or a tad lower, given the number diddling that came prior to a re-election.


By the way, all the jobjacking of U.S. jobs to India has resulted in a wild west sort of economy - with banks in India pegging their main rates near 10.5%.


The Next Oil Shock

The price of oil won't be declining much before we get to our next oil shock toward the end of the month, if one of the last bits from the web bot project turns out right.  As you may recall, our colleague in the project was forced to scrap the future reading technology for economic reasons, but not before we scored a number of amazingly accurate forecasts.  One unfulfilled expectation is for a major shock around Nov. 23-25.  We mention this because despite a small decline, the oil situation has remained fairly tight:   The threat of terrorist attacks seems to be holding further price declines in check:


We don't know if the next oil shock will involve a political angle, but we can see by watching the investigation into how Saddam Hussein made $21-billion in illegal oil trade, how some big names might be dragged into the mud:


Fannie May...

...loss $9 billion:


Prechter's Answer

You may recall that on Saturday I sent a note to Bob Prechter, the man behind - the leading technical analyst group using the ideas of R.N. Elliott.  Here's what I asked:

I hope you don't mind that I am posting a copy of this email on my web site, but here’s an incredibly interesting problem from the Elliott perspective.  Forgive me for being a bit long-winded here, but I want to do that so my readers - and perhaps yours - can appreciate the problem I'm about to outline.


The next couple of weeks should prove exceptionally interesting in the markets for any number of reasons related to wave counts.  Let me give you some of the highlights to be watching for:


·         The Dow Jones Industrials, while seeming to display amazing resilience are not as strong as one might otherwise thing.  The reason?  The effects of the falling dollar.  From the perspective of an international investor, consider what happens to the U.S. dollar denominated Dow when the value of the dollar falls - and let's say it falls 10% just to illustrate the point. If the Dow was at 9,500 and the current alone falls 10%, the internal (domestic US price) of the Dow would go up 10%.  In other words, because of the currency swing, the Dow could rise 950 points without changing its external valuation.


·         This brings me to the second point - about the price of gold.  Suppose that we have a price of gold (PG) at $425 an ounce as purchased with U.S. dollars.  With our hypothetical currency devaluation, the price of gold should go up $42.50 - to the $467.50 zone in little time at all.


As we can see in the data, the Dow had a weekly close of just over 10,595 the week ending March 4th of this year. At that time, the dollar conversion to Euros was 0.8199.  The dollar is now 0.775 Euro.


All of this sets up the interesting question:  If we look at the Dow from the Euro perspective, the B high 10,595 would be 8,686 if Euro.  Today's currency rates would imply 11,208 for the equivalent of B.


Have you divined any rule that would apply here, because 11,208 would be higher in dollar terms (suggesting a continued rally) but at the same time, it would not be higher from the perspective of Europeans, who could judge the U.S. to be ready for an imminent resumption of C down.


On behalf of my readers I'd like to thank you in advance for any thoughts you might have on this...


George Ure

Bob was kind enough to take time out from his other duties to reply:

"Of course, this is true all the time. Every market graph is simply a RATIO of one thing to another. The DJIA is a stocks/dollars ratio. If you make a Dowstocks/Euro ratio, you have a different graph. What Americans follow is the Dow/dollar ratio.

Sometimes we show a “constant-dollar” Dow, in which the denominator is adjusted by the PPI. I have also shown the Dow/gold ratio, which shows another different picture. But each is what it is, and there is nothing nefarious about their differences.

I think that the fact that the dollar’s fall explains all of the gains in the Dow and gold is bearish because it reveals that these indexes are not in fundamental bull markets; it’s really just a bear market in the dollar. For now.


Fighting Crime Pays Big

There's a typically thoughtful piece from John Crudele in today's NY Post worth reading - it goes into how prosecutors can land high dollar jobs if they're involved in a "big game hunt" kind of case - Martha Stewart, for example would be the kind of "big game" case implied. Several examples given.


Better Late than Never?

U.S. Immigration officials are tracking down nearly a half million illegals to make sure they exit the country as ordered:  Story


Earth Moving

Every time we read about a major train accident, we're reminded that the earth is on the move, as shown in the recent surge in 7.0 earthquakes.  In Australia:  Last Thursday in western Colbert County, Alabama:  In India, the day before:  And the Philippines the day after: Then there's the high profile cleanup of the bullet train in Japan following their last big shaker: So the ground upon which we stand is not as "solid" as you might sometimes think.


RFID Follow-up

A reader wrote in, in response to our RFID story yesterday:

Hope that this note finds all well. I was in LA last week and met a highly entertaining character. He told me that the optimists are the ones who expect a global economic collapse. He labelled himself a pessimist and said that he expected the top half of the food chain to die off.

I had been more clever nd had more time, I would ave let you know that was in the area. I stayed at friend's place in Pasadena, but he was out of town.

Main point of this note is to comment on the RFID story. I could be wrong, but my guess is that putting a bottle of pills (or any other consumer item) in a microwave oven for a few seconds on high would be enough to take the bark out of the RFID tags.

Not so quick there.  Over at we read that:

Q: Can I microwave products to kill any hidden RFID tags they might contain?

A: While microwaving an RFID tag will destroy it (a microwave emits high frequency electromagnetic energy that overloads the antenna, eventually blowing out the chip), there is a good chance the the tag will burst into flames first. The difficulty of destroying a hidden RFID chip is one reason we need legislation making it illegal to hide a chip in an item in the first place.

Best answer: Remove the RFID tag physically.  A little time under the idea tree and you can hatch all sorts of ways to have fun with RFID spy systems.

What's worth a bunch in a depression? Gold of course! [Most Recent USD from]